Motorists face a potential rise of £20 rise in car tax or fuel duty to cover a black hole in the Government’s finances caused by green cars. “People who think they will be financially better off by buying the most eco-friendly cars could be in for a shock.”
The Office of Budget Responsibility, which advises George Osborne, the Chancellor, said yesterday (Mon) that tax from fuel duty would be £500m lower than expected in two years time and car tax would be £100m down.
The Government said, in small print in the budget that went unnoticed at the time, it would consider reforming car tax to “ensure that all motorists continue to make a fair contribution to the sustainability of the public finances”.
Or the RAC said yesterday that it could raise fuel duty to cover the shortfall.
To make up the £600m would mean adding a £20 charge for every single motorist in the country either through the tax disc or by increasing fuel duty.
The Treasury is losing out because not only are drivers trying to protect their wallets by buying less thirsty cars, but manufacturers are producing far more efficient engines with greater fuel economy which attract a lower rate of duty.
In three years time, the OBR said the shortfall would be £700 million.
“The irony is that even as ministers encourage us to buy leaner, greener cars, they are being forced to consider ways of clawing back the money motorists think they will be saving,” said Stephen Glaister, the director of the RAC Foundation.
“What the Chancellor gives with one hand, he looks to take away with the other.
“People who think they will be financially better off by buying the most eco-friendly cars could be in for a shock as the Government looks at way of shoring up its falling tax revenue.”
A Treasury spokesman said last night it was seeking the views motoring groups on any changes.